Williamson v. Taylor

In my opinion, the Circuit Judge committed error in directing a verdict for the defendants, Hutton Co. I, therefore, concur in the result of Mr. Justice Fraser's opinion, remanding the case for a new trial, for the reasons which follow.

This is an action brought by the plaintiff for $1,250.00 margins on certain cotton contract for future delivery, which he claims to have paid to the defendant, Taylor, as the agent of the defendants, Hutton Co., and which, by reason of the fact that the market went in his favor, he is entitled to have returned to him. It does not appear that he is making claim for the profits upon said contracts, which are alleged to have amounted to over $300.00.

The facts are these: Williamson was, and is, an extensive dealer in cotton and cotton contracts, living at Abbeville; Taylor was the proprietor of an establishment at Greenwood, where he had an office rented in his own name, equipped with the usual paraphernalia of a brokerage concern; there were blackboards upon which the quotations of stocks and commercial commodities were constantly posted, chairs for the interested congregation, and other accommodations. He was a member of the New Orleans Cotton Exchange, in which he did business on his own account, but not of the New York Cotton Exchange; he handled business on the floor of the latter, through Hutton Co., who were members.

On May 19, 1922, Williamson, by telephone, directed Taylor to open certain trades in cotton futures for him. It is assumed that Taylor accordingly wired Hutton Co., for at 12:29 p. m. on that same day Hutton Co. wired Taylor that they had opened the trades as indicated, in Taylor's name. The telegram was initialed in pencil by Taylor and mailed to Williamson, confirming it by letter of the same date. While the telegram indicated that Hutton Co. were dealing directly with Taylor, and the letter of confirmation indicated that Williamson was dealing directly with Taylor, the transmission of the telegram by Taylor to Williamson in the manner stated was a clear indication by Taylor that the contracts which he had entered into with Hutton Co. were for the benefit of Williamson, and disclosed the manner in which Taylor had carried out the telephone order of Williamson.

Williamson had instructed Taylor to draw on him for the margins through the bank, which was done. The drafts were paid and were deposited by Taylor to the credit of his personal account. There were other transactions of a similar nature between Williamson and Taylor, the details of which are not set forth in the record for appeal, involving payments of margins, aggregating, all told, $1,250.00. All of the transactions were closed out in July, showing a profit to Williamson of over $300.00.

About July 4, 1922, Taylor closed his office and left for parts unknown, owing quite a good deal of money to Hutton Co. and to his customers. The plaintiff then made demand upon Hutton Co. for the margins paid by him to Taylor and for his profits on the various deals, and, upon refusal, instituted this action for the margins, $1,250.00, against both Hutton Co. and Taylor, based upon the theory, as alleged in the complaint, that Taylor "held himself out to be connected with the firm of W.E. Hutton Co.," and that the money had been paid to Taylor "for the purpose of purchasing and selling cotton for future delivery through the said W.C. Taylor and his New York representative, W.E. Hutton Co." (evidently intending to say "through the said W.C. Taylor, the representative of W.E. Hutton Co."); that Taylor accepted the money for Hutton Co. for the purpose indicated, and that it was paid to them. It is specifically alleged that "the said W.C. Taylor acted as the middleman or agent for the forwarding of the said money."

The plaintiff offered abundant evidence to sustain the allegation of the complaint that Taylor had a business connection with Hutton Co.; that he was in ____ the representative of Hutton Co., at Greenwood, in securing business for them; in other words, that he was a broker, an intermediary, or, as alleged in the complaint, a "middleman", between Hutton Co., and those who wished to purchase and sell cotton for future delivery.

His Honor, the presiding Judge, excluded certain testimony, the declaration of one Altman, and accredited travelling representative of Hutton Co., the declarations of Taylor and certain documentary evidence, tending to show that Taylor was so engaged at Greenwood as the representative of Hutton Co. To this exclusion the plaintiff has excepted. My view of this matter is that this excluded evidence added nothing to what had already been amply developed, and which was practically conceded, that Taylor was doing business as the representative of Hutton Co. at Greenwood, and that the scope of his engagement was to bring third persons in contractual relations with Hutton Co. in the purchase or sale of cotton for future delivery.

I shall, therefore, treat the questions involved as if it were a conceded fact that the relation which Taylor sustained to Hutton Co. was that of a broker, an intermediary, a middleman, a person engaged by authority of his principal to bring into contractual relations his principal and third persons.

His Honor, the presiding Judge, granted the motion of the defendants, Hutton Co., for a nonsuit, upon the ground that there was no evidence tending to establish the relation of principal and agent between the defendants, Hutton Co., and the defendant, Taylor. He held that the contracts upon which the plaintiff relied were within the gambling statute, but that there was no evidence tending to show that Hutton Co. received the money which Williamson paid to Taylor.

I shall content myself with a consideration of the ground that there is no evidence that, in the transactions between Williamson and Taylor, Taylor acted as the agent of Hutton Co. In this ruling, I think that his Honor, the presiding Judge, was clearly in error, for the reasons which follow.

As indicated above, I do not think that there is the slightest doubt but that Taylor had such a business connection with Hutton Co. as constituted him a broker, an intermediary, a middleman, and that his engagement with Hutton Co. was to bring about contractual relations between them and third parties. But it does not necessarily follow that this relation imposed upon Hutton Co. liability for all that Taylor may have done, particularly as in this case, for receiving money from customers who were entering into contractual relations with Hutton Co. through their broker.

A broker is a species of agent with peculiar powers. He is not supposed to have possession of the principal's goods, concerning which a contract is to be entered into between the principal and a third person. He is not supposed to collect from the purchaser any part of the purchase price, and is not authorized to do so by the terms and nature of his employment. His duty ordinarily is simply to bring the parties together, his principal and the third person, who will consummate between themselves the contemplated transaction. But he is none the less an agent, although with greatly circumscribed duties and powers. 9 C. J., 510, 515, 518, 665, 667, 668, 670, 671. Ayres v. Thomas116 Cal., 140; 47 Pac., 1013. Higgins v. Moore,34 N.Y., 417.

"A broker is a mere intermediate agent, negotiating between buyer and seller. As broker, he is not entitled to the possession of the property which is the subject of sale or purchase; nor does he, in the character of broker, receive or pay the price, nor is he authorized to do so. It is his office to negotiate contracts between others, which they carry into execution by performance." Higgins v. Moore,34 N Y, 417.

"Primarily a broker employed to do a particular thing is the agent of the party who first employed him, and he cannot, without the full and free consent of both parties, be the agent of both throughout the transaction; but in so far as he acts strictly as a middleman, to bring the parties together or to execute the contract after the parties have agreed on the terms, such as to effect a purchase or sale of property, he is the common agent of both parties."9 C.J., 518.

This dual agency covers only such transactions as are ordinarily within the scope of the broker's agency; that is, to bring the parties together when they are supposed to consummate their trading. As has been seen, he has no possession or control of the property to be dealt with; he has no authority to make or receive payments upon the proposed contract. If, however, his limited authority as a broker is extended by express or implied authorization by the principal, the latter will be bound by his acts under such extended authority.

"Except in case of a customer or usage of trade to the contrary, or an estoppel arising against the principal, a payment made to a broker and not received by the principal is not ordinarily binding upon the latter as a payment to him, unless the broker has express or implied authority to receive it, in which case the rights of the parties are the same as if the payment had been made to the principal." 9 C.J. 671.

"A person may be estopped to deny the agency of a broker who has acted for him in negotiating a contract. So, if the principal holds out the broker as having a certain authority, he cannot as against one who deals with the broker on the faith thereof deny that such authority was in fact given." 9 C.J., 670.

The main question in this case is whether or not there was sufficient evidence of this extended authority on the part of Taylor to receive payments made by Williams on upon the contracts, which would bind Hutton Co. to require a submission of such issue to the jury. It seems clear to me that, if the case were one of ordinary brokerage, where the broker's duty and authority were simply to bring the contracting parties together, his principal would not be responsible for money received upon a proposed contract, but that in this case there is evidence tending to show that Taylor was authorized by Hutton Co. to receive and transmit to them such payments, and that the question should have been submitted to the jury.

The manner in which Hutton Co. Transacted business with Taylor shows clearly that it was understood that Taylor should make collections for margins upon contracts entered into through him. They knew, in the first place, that orders sent in by Taylor were not necessarily, or even probably, upon his own account; their representative, Altman, was frequently in Taylor's place of business, his "bucket shop," saw its equipment, and was introduced to prospective customers, who were urged to deal with Hutton Co. through their representative, Taylor. They wrote frequent letters to Taylor, appreciative of his efforts in securing from others business for them. In one letter, referring to the contracts of the Grendel Mills, they inquired whether they should be entered in the name of the mills or of Taylor, showing that, even if they had been entered in Taylor's name they knew that Taylor was not acting upon his own account. The orders sent in by Taylor were sent in by wire and immediately complied with by Hutton Co., who wired confirmations. without a dollar passing between Hutton Co. and Taylor. They must have relied upon Taylor collecting at the time the margins from the customers, charged them up to Taylor, and expected to be reimbursed by Taylor. In addition to his personal deposit account, Taylor opened a deposit account in the name of Hutton Co., to which he applied from time to time collections made by him, amounting to more than $20,000.00, which Hutton Co., constantly drew against. When the crash came, Taylor, it appears, was largely indebted to Hutton Co., manifestly on account of margins collected by him, and for that reason Hutton Co. now propose to repudiate the agency of Taylor to do that which their method of dealing had so plainly authorized.

"If the contract negotiated by a broker with a third person in behalf of a principal is within the terms of his authority, the principal is bound thereby. Accordingly the other contracting party may maintain an action against the principal on the contract for breach thereof." 9 C.J., 667.

"If in negotiating a transaction in behalf of a principal a broker acts within the terms of the authority which has been conferred on him, either expressly or by implication, the principal is bound thereby, and the other party may hold him to the bargain." 9 C.J., 668.

Nor does it makes any difference as to the rights of Hutton Co. against Williamson, or of Williamson against Hutton Co., upon the contracts consummated through Taylor, that the contracts were entered upon the books of Hutton Co. as contracts between them and Taylor.

"A broker's relation to his clients is not affected by the fact that, in executing the client's orders, he assumes the position of principal towards third persons and with whom he deals." 9 C.J., 515.

"The principal is entitled to enforce a contract negotiated by his broker with a third person, and this is so, even though the contract is made in the broker's name and the principal is undisclosed." 9 C.J., 665.

If Hutton Co. had the right under these contracts to proceed against Williamson, as unquestionably they had, then Hutton Co. could not deny their liability upon them to Williamson; an element of their liability was their duty to return that which their agent, by authority plainly implied, had received upon the contracts.

MR. JUSTICE MARION concurs.

MR. CHIEF JUSTICE GARY did not participate.